Infrastructure and its role in Brazil’s Development Process

Infrastructural issues have moved to the very heart of the policy agenda in Brazil, having been brought into focus by the build up to the FIFA World Cup and the 2016 Rio Olympics. This paper opens with a brief historical review of infrastructure in Brazil, beginning with the 19th Century and the rise of concession contracts and the subsequent decision to nationalize infrastructure and administer the sector through state enterprises throughout most of the 20th century. The analysis then focuses on the reversal of this policy in the late 20th and early 21st century and the decision to grant the private sector, through concession contracts and Public Private Partnerships, a major role in the development of new infrastructural projects and the takeover of existing assets. Following this overview, Section 2 examines contemporary infrastructure challenges facing Brazil and the success of attempts to address them. The first component of the section comprises an econometric analysis of the relationship between growth and infrastructural spending. The analysis hints at the constraints implied by recent patterns of infrastructural investment. The second component of this section sets the current infrastructural challenge in slightly broader context, taking into account issues such as quality and reliability of infrastructure. This section also considers the implications of relying on concession contracts to deal with infrastructure needs. Next, Section 3 reviews the implications of the PAC infrastructure investment program launched under the Lula administration, and continued under its successor, the Rousseff administration. We highlight the constraints - institutional, regulatory, financial and political - which have shaped the PAC’s evolution and which have prevented it from living fully up to expectations. Section 3 argues that the drivers of supply (as well as demand) for infrastructure are very complex and quite sector-specific. Bearing this in mind Section 4 aims to add depth to the analysis by reviewing in more detail the experiences of the urban transportation sector. The choice of this sector for enhanced focus stems in part from the strong relevance which, we feel, it has for other developing or emerging economies, notably in Africa. In addition, the social unrest which initiated in Brazil in mid-2013 has had, as its focus, concerns centering on urban transportation issues. The broader international relevance of Brazil’s experience - especially from an African perspective - forms the basis for the conclusions, set out in Section 5.